Blog

8 Small Business Tax Deductions – OnlineBusinessDegree.org

If you’re a small business owner, you may not be aware of the number of legit deductions you’re entitled to take each tax year. Below are just eight, with links to sites that provide even more details as to what you can and can’t deduct. However, we strongly suggest that you hire an accountant, preferably one with experience working with small businesses, to go over deductions and fill out and submit your tax returns. The money you save (and possibly get back in the form of a refund) and relief that you know your taxes were done correctly is totally worth the relatively small fee you’ll pay an accountant.

  1. Home office:


    Even if just one room in your home is dedicated to your small business, you can deduct several home office expenses, including a portion of your rent and utility bills. However, the IRS has some very strict rules about what does and does not constitute a “home office,” and the term “exclusive use” gives you very little wiggle room. If you use a portion of your home, garage, or other building to operate your business, check with an accountant to see exactly what expenses you can legally deduct.

  2. Entertainment:


    When you take a potential client out to dinner or conduct a staff meeting over lunch at a local restaurant, be sure to save all the receipts; you can legitimately deduct 50% of the meal’s expense as “entertainment,” so long as business was discussed during the meal. Make a note for your records the purpose of each business meal you take so that you have a back-up in the event of an audit.

  3. Your car:


    If you have a vehicle dedicated solely for business use, you can deduct all business-related expenses, including mileage, tolls, and parking fees. If you use your vehicle for both business and other non-business tasks, picking up your children from school for instance, you need to separate the business-related miles driven and gas you purchased. Sound like a pain? Consult with an accountant if you’re not sure how to determine your expenses.

  4. Business travel expenses:


    There are several expenses you can deduct when your travel away from what the IRS refers to as your “tax home” for more than 24 hours. A simple example would be if you flew to another city to attend a business-related conference. Plane fare, taxis, lodging, and meals are all legitimate business travel expenses that you can deduct.

  5. Advertising and promotion:


    Expenses your incur for advertising and marketing your small business, including printing business cards, buying radio or print advertisements, and other promotional activities are all deductible. Before deducting the cost of building and maintaining a website for your business, determine with the help of an accountant the business purpose of the website which determines how it should be categorized as a deductible expense.

  6. Equipment:


    The cost of a piece of equipment purchased for your small business, including a new or used personal computer or printer, new or used office furniture, off-the-shelf software, and even a business vehicle, is deductible as well. However, both the total deduction allowed for equipment purchases, which in 2012 is $139,000, as well as a bonus depreciation deduction that small business owners can take when equipment expenses exceed the amount allowed by the IRS, are being reduced. Consult with an accountant if you plan to purchase a great deal of equipment for your business this year.

  7. Cell phone:


    Can you deduct the cost of a new cell phone and your cell phone bills? Yes, you can! But you can only deduct the portion used for business purposes. If you pay a flat rate for unlimited long distance calls, which include both personal and business, use your itemized bill to determine the total cost of just your business-related calls. Any dedicated services for your small business, including telephones and Internet, are also deductible.

  8. Lawyers, accountants, and consultants:


    We keep telling you to hire an accountant to assist you with and file your taxes. And guess what? You can deduct his or her fee, even if it’s only a few hundred bucks, as yet another business expense! You can deduct business-related consulting and lawyer and legal fees as well.

Comments